Asian Fund Managers Turn More Optimistic on Growth but Curb Equity Return Expectations: BofA Survey

Asian fund managers became more constructive on global and regional economic growth in December, while simultaneously tempering expectations for equity market returns, according to Bank of America’s latest fund manager survey. The findings reflect a cautiously optimistic investment outlook, shaped by improving macroeconomic conditions but constrained by elevated asset valuations.

Bank of America analysts noted that global growth expectations have risen to a four-year high, signaling renewed confidence in the global economic recovery. Optimism toward Asia-Pacific economies excluding Japan also remained strong, hovering near one-year peaks. This positive sentiment has been supported by subdued inflation expectations across the region, reinforcing views that most Asia ex-Japan central banks can maintain an easing or accommodative policy stance in the near term.

Despite this improving macro backdrop, investors are becoming more measured in their equity return outlook. According to the survey, valuations across many Asian markets are trading above long-term averages, which is limiting expectations for outsized gains. As a result, fund managers are focusing more on selective opportunities rather than broad-based rallies.

Japan continues to stand out as the most favored market in the region. Bank of America analysts attributed strong investor preference for Japan to a favorable earnings outlook, ongoing corporate governance reforms, and expectations that policy normalization by the Bank of Japan will be gradual. Japanese banks remain particularly attractive due to their sensitivity to higher long-term interest rates, while semiconductor stocks linked to the artificial intelligence theme also remain in demand. Recent market pullbacks are widely viewed as healthy consolidation following a strong rally earlier in the year.

In contrast, sentiment toward China has cooled after six months of improving confidence earlier in 2025. While the longer-term structural outlook is no longer seen as severely negative, investors are waiting for clearer and more forceful policy stimulus before increasing exposure. As a result, allocations to China have slipped back to underweight, with household risk appetite weakening and savings taking precedence over investments.

Elsewhere in Asia, India has moved back to a mild overweight, supported by diversification demand and relatively resilient domestic growth. Taiwan and South Korea remain favored as well, buoyed by expectations of a strengthening semiconductor cycle and continued demand linked to global technology and AI trends.